Aligning Incentives in the Forward Evolution Around Value-Based Payment: Major Obstacles Cited | Mark Hagland | Healthcare Blogs Skip to content Skip to navigation

Aligning Incentives in the Forward Evolution Around Value-Based Payment: Major Obstacles Cited

July 16, 2018
| Reprints
The implications of a recent analysis of value-based healthcare are many—and challenging

As Associate Editor Heather Landi noted in a June 25 report, a new study has cast doubt on the level of progress being created in value-based payment models across the U.S. “The penetration of population-based value-based payment models is not yet having an impact on curbing growth in total cost of care, according to a new analysis by the Healthcare Financial Management Association (HFMA), Leavitt Partners and McManis Consulting,” she wrote, referring to the study, entitled, “What is Driving Total Cost of Care?” which analyzes the factors influencing total cost of care in U.S. healthcare markets.

“One of the key findings of the analysis is that the early years of value-based payment (VBP) models did not show a reduction of the total cost of care or improvement in clinical quality outcomes at the market level, according to researchers who analyzed performance results of accountable care organizations and other population-based VBP models. Researchers concluded that at value-based payment models have penetrated broadly in some markets, but not deeply in most. The three organizations, with support from the Commonwealth Fund, used commercial data from 2012 to 2014 and Medicare data from 2007 to 2015 to conduct two quantitative analyses: the first examined correlations between the penetration of population-based VBP models and total cost of care for Medicare and commercial payers; the second looked at other market factors related to baseline Medicare costs and cost growth. A qualitative study of nine geographically and demographically diverse markets also was conducted.”

The authors of the report—James H. Landman, Ph.D. (HFMA), Keith Moore (McManis Consulting), David B. Muhlestein, Ph.D. (Leavitt Partners), Nathan J. Smith, Ph.D. (Leavitt Partners), and Lia D. Winfield, Ph.D. (Leavitt Partners)—write this in the report’s introduction:

> The penetration of population-based value-based payment (VBP) models is not yet having an impact on curbing growth in total cost of care. The efficacy of these models in reducing growth in total cost of care has not yet been proven, however, as even in markets where these models are more prevalent, most models do not yet incorporate sufficient financial incentives to impact care delivery significantly.

> Although more time and evidence are needed to prove the efficacy of population-based VBP models, there are other models that may be more appropriate for different populations. Alternative VBP models of interest to stakeholders interviewed for this study include episode-based payments, reference-based pricing, on-site health centers for employers and their employees, consumer-driven models tied to more effective transparency tools, and models that target the needs of specific patient populations.

> The question of “what type” of competition may be more important than “how much” competition. Lower-cost markets appear to benefit from competition among healthcare systems with well-organized provider networks and geographic coverage across their market. Health plan competition also appears to be a significant factor, especially with respect to encouraging innovation in payment models and plan design within a market.

> Lower-cost markets also appear to benefit from organized mechanisms, including state-sponsored or endorsed reporting agencies and employer coalitions, for more transparent sharing of information on provider quality and costs. Interviewees also believe that greater transparency of quality and cost information for consumers is necessary, while acknowledging that transparency tools that have been offered thus far have had limited impact.

> Healthcare leaders across markets believe that further changes to payment and care delivery models are inevitable and will likely include value-based components. In most markets, however, it is not yet clear what or who will be the catalyst to push further change.

What are a few underlying causes or issues?

> Few population-based VBP models offer significant incentives to manage total costs of care. VBP contracts for most provider organizations interviewed for this study had upside risk only; very few organizations were yet taking on downside risk. Both health plans and provider organizations felt it was important to take an incremental approach to risk. The result, however, is that financial incentives are not in place for broad-scale changes to care delivery.

> Incentives have not yet been aligned from the system level to the clinician level. Across most provider organizations interviewed for this study, clinician compensation remains heavily reliant on productivity-based compensation. Within some physician practices, especially those focused on primary care, there was a sense that change was closer at hand and compensation metrics tied to quality, access, and patient panel size were being introduced.

> Infrastructure costs can delay positive realization of a return on investment. For organizations that are participating in population-based VBP models, the infrastructure costs for patient population analytics and care management can be significant and are likely to significantly offset any savings realized during early years.